Gap Fade Options Strategy and Signal Nearing for New Sector ETF Extremes Options Strategy

The NASDAQ 100 (QQQQ) opened lower today for a gap lower. However, the gap was only $.21, which in most cases is a borderline signal. Had QQQQ been in a short-term oversold state a signal would have been triggered, but with the tech-heavy index firmly in a neutral state and the gap only $.20 a signal was not triggered and the strategy was better for it as we were able to avoid a loss for the trade.

The risk/reward just isn’t high enough when the gap is only $.20 while QQQQ is in a neutral state. I typically purchase an in-the-money option with a delta between .50 and .65 and when taking the bid/ask spread penalty in to account a gap close on a gap like today would have limited gains. As I said the strategy avoided a loss and who knows we could have a much better setup tomorrow as QQQQ closed near the lows of the session.

Several of the sector ETFs that I follow for the Sector ETF Extremes Options Strategy have moved into an short-term oversold state and are very close to a signal. Another decent push lower tomorrow will surely signal a trade in the new strategy and we can’t wait. The response has been outstanding so far so there is the potential that we might have to put a cap on subscribers soon. Don’t worry, you can always get on the waiting list if we run out of room.

Give the strategies a try. If you are not 100% thrilled then do not hesitate to email within 30 days and we will refund your money immediately. SUBSCRIBE

Andrew Crowder, Chief Options Strategist, Crowder Investment Research, LLC

Overbought/Oversold Levels for June 18th, 2008

ETF Extremes Options Strategy

• S&P 500 (SPY) – 31.3 (neutral)
• Dow Jones (DIA) – 27.6 (oversold)
• Russell 2000 (IWM) – 45.3 (neutral)
• NASDAQ 100 (QQQQ) – 39.6 (neutral)

Sector ETF Extremes Options Strategy

• Biotech (IBB) – 41.1 (neutral)
• Consumer Discretionary (XLY) – 29.8 (oversold)
• Health Care (XLV) – 30.9 (neutral)
• Financial (XLF) – 30.8 (neutral)
• Energy (XLE) – 66.1 (neutral)
• Industrial (XLI) – 24.4 (oversold)
• Materials (XLB) – 51.7 (neutral
• Real Estate (IYR) – 32.5 (neutral)
• Retail (RTH) – 34.3 (neutral)
• Utilities (XLU) – 57.0 (neutral)

If you would like to follow my strategies with real-time alerts or have them autotraded by a participating broker please click the following link: SUBSCRIBE

Back to Neutral – No Edge as the Market Approaches the Week of Options Expiration

The short-term status is back to neutral in every major benchmark and sector that I follow on the blog and in my options strategies. This means that I will be sitting on the sidelines as we move in to the week of options expiration. If I can’t find an edge, which means the risk/reward doesn’t suit my liking then as you all know from my past experience I have no problem sitting on the sidelines. Cash is a position.

In trading patience is a requirement.

Several months ago I came across an article by a fellow trader named Mike Kestler. His statements coincide with the trading philosophy of the options strategies that I follow within my service and moreover, my trading style.

“Without patience traders get pulled into an endless cycle of over trading, sub par entry points and losing trades. Most traders get drawn into trades that do not fit their trading style because they are just plain bored and looking for something to trade. With patience, it is easier to have the courage and fortitude to execute the proper trade. If a trader has had the patience to stay away from the less than ideal setups, he or she will be able to have the strength and focus to execute on the higher probability trades. As a trader, you have to have the inner strength to pounce on the opportunity when it presents itself.”

Patience is the key. Opportunities are made up easier than losses, so if you let a few pass you by don’t dwell on what could have been. There will always be more opportunities around the corner. Remember, trading is a marathon and not a sprint.

I will continue to patiently wait for opportunities to arise and only trade scenarios where the probability is overwhelmingly on my side. That means trading extremes. This certainly does not guarantee a successful trade, but it definitely makes for a favorable one. This is evident in the performance of the ETF Extremes strategy that I have been following in this service for over two years.

• The NASDAQ 100 (QQQQ) closed near the highs of the day so we could potentially see a signal in the Gap Fade strategy on Monday of the market opens to the upside.

• Also, the Sector ETF Extremes begins on Monday. IF you would like to know more you can read about it here, or do not hesitate to email us. I traded this on a trial basis for my subscribers and the results were overwhelming. The foundation of the strategy rests on the same basic guidelines as the ETF Extremes but using sector ETFs as the underlyings of choice. This should make for a bit more action that the other two strategies that I currently follow so a sound position-sizing technique coupled with risk-management will be imperative for the long-term success of this strategy.
• Charles Kirk ponders the question “What do you do for a living?”

Have a wonderful and hopefully sunny weekend!

Andrew Crowder, Chief Options Strategist, Crowder Investment Research, LLC (www.crowderoptions.com)

Short-term Overbought/Oversold Levels for June 13, 2008

ETF Extremes Options Strategy

• S&P 500 (SPY) – 38.2 (neutral)
• Dow Jones (DIA) – 49.4 (neutral)
• Russell 2000 (IWM) – 51.1 (neutral)
• NASDAQ 100 (QQQQ) – 47.3 (neutral)

Sector ETF Extremes Options Strategy

• Biotech (IBB) – 47.8 (neutral)
• Consumer Discretionary (XLY) – 55.6 (neutral)
• Health Care (XLV) – 40.8 (neutral)
• Financial (XLF) – 47.3 (neutral)
• Energy (XLE) – 51.4 (neutral)
• Industrial (XLI) – 41.2 (neutral)
• Materials (XLB) – 56.2 (neutral
• Real Estate (IYR) – 48.2 (neutral)
• Retail (RTH) – 59.5 (neutral)
• Utilities (XLU) – 57.1 (neutral)

If you would like to follow my strategies with real-time alerts or have them autotraded by a participating broker please click the following link: SUBSCRIBE

Site is launched! Daily blog is back! Strategies continue to move onward and upward!

The strategies, particularly the ETF Extremes strategy has performed well during the websites revision. The hiatus from the blog has given me a much needed breather after two years of daily posts and now I am back stronger than ever. In the process of the new revision I have also added a new options strategy to the mix.

You can read about it here: Sector ETF Extremes

Anyway, I will be back later this afternoon with a post-market post, so stay tuned!